Cadillac Jumps On Sport-Utility Bandwagon
It may be nearly last to the party, but Cadillac is finally going to bring an upscale full-size sport-utility vehicle to showrooms.
The move is a strategic reversal for Cadillac, General Motors’ vaunted luxury marque. The division resisted entering the increasingly crowded sport-utility segment for years because it feared that a truck-based vehicle would sully the brand’s prestigious image.
But strong sales of sport-utility vehicles, particularly those in the luxury segment, and the success of some of Cadillac’s key competitors, such as Lincoln and Mercedes-Benz, prompted GM to do a belated about-face.
“The [markets’] move to upscale, full-size sport-utilities was frankly faster than we expected,” said Cadillac President John F. Smith, who has repeatedly denied the division would offer a truck-based sport-utility.
Sport-utilities are the fastest-growing auto segment, with sales up 13% so far in 1997, while overall vehicle sales are flat. The market’s hottest segment is full-size luxury sport-utilities, with sales up a whopping 66%. Vehicles in demand include the Lincoln Navigator and Mercedes-Benz ML320.
“Cadillac’s decision is quite natural,” said Bob Schnorbus, director of auto analysis for J.D. Power & Associates. “The luxury segment is where the growth is occurring.”
It is also where the money is. Schnorbus estimated that sport-utilities account for 60% of Big Three profits but just 15% of their sales.
“They couldn’t afford not to be in this market,” said Michael McLean, owner of McLean Cadillac in Tustin. “We’ve been asking for this for five years.”
Few details of the new Cadillac sport-utility were offered. Company officials said it would be developed from GM’s existing sport-utility platform, which now produces the Yukon, Tahoe and Suburban.
Auto analysts said the vehicle will probably be a knockoff of the GMC Denali, a luxury sport-utility similar to the Yukon that’s planned for introduction next year. It also could be a smaller version of the popular Suburban.
Some analysts warned that GM could hurt Cadillac’s image if the new vehicle is perceived as just a re-badged model. But Smith vowed it would be a purebred Cadillac.
The new vehicle is part of a larger effort to rejuvenate Cadillac, which has lost ground to Japanese and European competitors. In 1990, Cadillac held 20% of the luxury market; last year it slipped to 14.8%.
Smith said the yet-unnamed vehicle represents an acceleration of Cadillac’s planned entry into sport-utilities. The division continues to develop a hybrid sport-utility, which will combine a car’s ride and handling with a truck’s image and versatility. The hybrid will not debut until 2001 or later.
The decision to give Cadillac a sport-utility was touted as an example of how the corporation, long known for its bloated bureaucracy, had streamlined its decision-making process. Smith said plans for the vehicle were started less than three months ago and were approved in just two weeks.
But analysts noted that Cadillac had debated sport-utilities for years and is entering the market just as competition is heating up and profit margins are being squeezed.
“My reaction is, ‘Where have they been for the last 15 years?’ ” said David Healy, analyst with Burnham Securities.
Wesley Brown, an analyst for Nextrend, said that Cadillac would probably price the product between $45,000 and $50,000, slightly higher than the Lincoln Navigator. “They could make $15,000 to $20,000 on each,” he said.
Dealers said a sport-utility would draw a younger clientele and give Cadillac an opportunity to showcase its newest products, including the Catera compact sedan and redesigned Seville sedan.
“This puts us in a market we haven’t been in,” said Bill Blankenship, sales manager of Ehlers Cadillac in Los Angeles. “We will draw younger and more affluent customers.”
